GST Fallout: Kerala Loses Its Tourist Attraction

Industry players say that Kerala’s money-spinning tourism industry has been hit hard by the GST regime, with taxes shooting to as high as 33 per cent and affecting five-star resorts….A special report by Sanu George for Asian Lite News

According to GST Council tax rates, non-AC restaurants charge 12 per cent GST on food while AC restaurants and those with liquor licence charge 18 per cent. Five-star hotels charge a GST of 28 per cent.

Official figures say foreign tourist arrivals to Kerala in 2016 was 10,38,419 — up from 977,479 — while domestic tourists grew 5.67 per cent and touched 1,31,72,535 visitors. The total foreign exchange earnings from the tourism sector was Rs 7,750 crore in 2016.

Leading tourism player Jose Dominic, who heads the CGH Earth that has around a dozen five-star rated premium properties in Kerala and outside, said that GST was “a killer”.

“Today taxes in the tourism sector have reached as high as 33 per cent (28 per cent and another 5 per cent for tour operators), and all this is borne by the traveller. If you see the tourism tax structure prevailing in Southeast Asia, it ranges from 7 to 12 per cent while Sri Lanka has 16 per cent tax,” said Dominic.

He said Kerala, along with states like Rajasthan, Goa and Odisha, would be the worst affected by GST as they get the maximum number of foreign tourists.

“In Kerala, one out of four new jobs created are in the tourism industry. But with GST, things could go haywire. It must not be forgotten that Kerala came on the tourism map after the arrival of foreign tourists. Now, with air fares already sky high, GST could well sound the death knell for this industry in Kerala. Corrective steps are the need of the hour,” said Dominic, a chartered accountant by profession.

Dominic added that if the “correction does not come quickly”, then the international flow of tourists could be hit, not just in Kerala but in the rest of the country too.

M.R. Narayanan, General Secretary of the Confederation of Tourism Industry in Kerala, said the 33 per cent tax rate was applicable not just to the five-star category but also to all rooms that have a declared tariff above Rs 7,500.

“Technically speaking, this would be applicable to even three or four-star resorts because tourism is a seasonal industry, and during the peak season in Kerala — starting in September and ending in March — every resort has a different slab. So, it could affect practically all the leading players,” said Narayanan.

He added that the only exemption was for ayurveda resorts that have been classified as ‘Ayurveda hospitals’.

E.M. Najeeb, Regional Chairman, South India chapter of Indian Association of Tour Operators, said that they had raised the issue with everyone including Prime Minister Narendra Modi “but as yet there is no solution”.

“We expected the GST Council meeting held early this month to review our demand but nothing has happened. Our business has started to get affected as tourists these days are conscious of spending. Price is a crucial criteria on deciding a destination,” said Najeeb.

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